Gov. Gavin Newsom is suing the Trump administration to halt plans to divert billions of dollars in homelessness funding away from permanent housing, a move state officials warn could push tens of thousands of formerly homeless Californians back to the street.
The administration is seeking to redirect the funds toward shorter-term housing and outreach efforts, prioritizing programs that impose work requirements, mandate addiction or mental health treatment and help police close encampments.
California officials estimate the shift could mean a loss of $250 million to $300 million in grant money this year for local homeless housing sites and rental assistance programs statewide.
“While Donald Trump is busy hosting parties and showing off his gold-plated decor, Americans are worried about groceries, rent, and basic stability,” Newsom said in a statement this week. “Most families can’t fall back on inherited wealth or walk away from failure through bankruptcy — but they’re the ones stuck paying for his chaos and incompetence.”
In a statement, the U.S. Department of Housing and Urban Development chastised Newsom and officials from a coalition of 20 states who brought the lawsuit.
“HUD is dismayed that the plaintiffs have chosen to misuse the Courts and pursue this delaying tactic to serve their own personal political agenda at the expense of the homeless individuals, youth and families now living on our Nation’s streets,” a HUD spokesperson said.
The long-anticipated updates were made official early this month, when HUD posted notice for $3.9 billion in Continuum of Care funding, the primary source of federal homelessness dollars.
According to the new funding guidelines, local governments will be allowed to use only 30% of those dollars for permanent housing or rental aid, freeing up more money for transitional housing and sober-living programs. In California, 87% the funds currently go toward long-term housing services.
“Our philosophy for addressing the homelessness crisis will now define success not by dollars spent or housing units filled, but by how many people achieve long-term self-sufficiency and recovery,” HUD Secretary Scott Turner said in a statement announcing the funding changes.
The news has sent homelessness service nonprofits in the state scrambling to understand the impact on their programs. Providers worry that, without finding ways to fill the funding gaps, they may be forced to close housing sites and end rental aid efforts, leaving thousands without a crucial lifeline across California’s staggeringly unaffordable rental markets.
Administration officials have argued the shift away from permanent supportive housing and voluntary services is necessary to reverse what they describe as decades of failed polices that have led to rising homeless populations and an explosion in dangerous encampments. They contend that federal homelessness funding has gone to support unsafe housing sites where people frequently use drugs without getting the help they need — a claim homelessness services providers maintain is exaggerated.
In California, homelessness has surged 62% over the past decade to an estimated 187,084 people, though some large counties reported encouraging declines this year. The Bay Area’s estimated homeless population reached 38,891 last year, a 46% spike since 2015. The increases came as housing costs have also soared over the last decade.
The new lawsuit contends the funding changes are illegal because they were made without congressional authorization and are “not supported by evidence or reason.” California officials said the administration’s plans would slash money for “proven strategies to address homelessness,” including supportive housing efforts such as Newsom’s Homekey program, which has funded at least 259 permanent and temporary homeless housing projects.
“This would undo years of progress and destabilize our neighbors who finally found a safe place to live and stability,” California Health and Human Services Secretary Kim Johnson said in a statement. “It’s harmful policy that will lead to devastating health outcomes.”